Where Have All the Publicly Traded Steakhouses Gone?
Revenue climbed 12 percent to nearly $400 million in the 13 weeks ending on July 1, fueled by modest expansion and a 3 percent uptick in same-restaurant sales. Profitability grew even faster, climbing 17 percent on a per-share basis to a 33 cents. That's in line with analyst expectations, and that's a good thing, since it has come up short on the bottom line in each of the four previous quarters.
Don't wait up for the next casual dining steakhouse chain to report. Texas is the Lone Star State, and when it comes to standalone casual steakhouses, Texas Roadhouse is lone star, too.
The Wild Wild West Days on Wall Street
Back in the 1990s, casual steakhouses -- such as Outback Steakhouse and Lone Star Steakhouse & Saloon -- were market favorites. With Peter Lynch's "buy what you know" mantra, it was easy to see these popular concepts early in their life cycle.
Folks were dining out, and investors were seeing with their own eyes the long lines gather at Outback for its fried Bloomin' Onion appetizer and Lone Star for its roadhouse appeal. Money poured in, and underwriters were paying attention.
Wall Street looked for similar concepts to take public, hoping to satisfy the market's appetite for growing steak restaurants drawing mainstream audiences. LongHorn Steakhouse, Sagebrush, Logan's Roadhouse and Timber Lodge Steakhouse were just some of the regional faves that took advantage of the trend to go public. But if you're trying to pull up ticker symbols for any of these companies, you'll come up empty. The craze faded even faster than it materialized.
Jumping the Shark Steak
There isn't a lot of agreement in pinpointing when standalone casual steakhouses jumped the shark. It could have been when Outback felt it needed a secondary growth vehicle so it began to focus on Carrabba's Italian Grill. It could have been when Lone Star's financial performance began to get lumpy, and it turned to dividend distributions as the concept matured.
They both eventually went private. Similar fates awaited many smaller rivals. Some chains were bought out by larger restaurant operators. Darden Restaurants (DRI) snapped up LongHorn's parent company. Cracker Barrel (CBRL) picked up Logan's before unloading it in a $486 million transaction in 2006. Timber Lodge closed some locations. Roadhouse Grill filed for bankruptcy and eventually buckled under.
Today's Slim Pickings
Investors who weren't around in the early-to-mid 1990s when casual steakhouses were all the rave probably can't believe that this was once a hot niche. It was. It may not have gotten dot-com mania intense, but it was a popular place for growth stock investors to place their wagers two decades ago.
Today's investors can still get a taste of casual steakhouses. Darden still owns LongHorn, and after selling off Red Lobster earlier this year, it's now the operator's second largest concept after Olive Garden. Outback Steakhouse was eventually taken public again, using its signature fried onion appetizer as the inspiration for its Bloomin' Brands (BLMN) corporate moniker.
It's not the same, of course. Bloomin' Brands -- which includes Carrabba's and Bonefish Grill -- only grew sales at a 6 percent clip in this year's first quarter. Darden -- bogged down by shrinking sales at Olive Garden -- is doing even worse. Texas Roadhouse is the only standalone steakhouse, and it's growing in the double digits. That's not bad, but the appetite isn't there. The only thing that casual steakhouse investors are hungry for these days is nostalgia, but it's never as filling as it seems to be.
Motley Fool contributor Rick Munarriz owns shares of Cracker Barrel Old Country Store. The Motley Fool recommends Texas Roadhouse. Try any Motley Fool newsletter service free for 30 days.